Leading Ancillary Revenue Airlines IdeaWorksCompany.com ...€¦ · task of aligning the troika of human resources, products, and customers. This requires specific ancillary revenue

Issued 02 October 2018

Leading Ancillary Revenue Airlines IdeaWorksCompany.com LLC © 2018 Page 1

Leading Ancillary Revenue Airlines

and the Women Who Boost Their Profits

CarTrawler-sponsored analysis presents the ancillary revenue philosophies of

four women leaders and the compelling features of the a la carte initiatives they lead.

Contents

Recognize the wisdom of women and celebrate their leadership .................................................. 4

These four airlines are ancillary revenue leaders in different ways ............................................... 5

Alaska Airlines captures cash from its co-branded credit card....................................................... 6

Finnair uses GDS to build a global network of ancillary revenue ................................................... 8

Jetstar uses bundles and subscriptions to deliver ancillary revenue ............................................ 11

WOW air stretches a la carte to greater distances ........................................................................ 14

Four ancillary revenue strategies from four airline leaders ........................................................... 16

Disclaimer: IdeaWorksCompany makes every effort to ensure the quality of the

information in this report. Before relying on the information, readers should obtain any

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responsibility for, the accuracy, currency or completeness of the information.

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About Jay Sorensen, Writer of the Report

Jay Sorensen’s research and reports have made him a leading authority on frequent flyer

programs and the ancillary revenue movement. He is a regular keynote speaker at the

annual MEGA Event, spoke at IATA Passenger Services Symposiums in Abu Dhabi and

Singapore, and has testified to the US Congress on ancillary revenue issues. His published

works are relied upon by airline executives throughout

the world and include first-ever guides on the topics of

ancillary revenue and loyalty marketing. He was

acknowledged by his peers when he received the Airline

Industry Achievement Award at the MEGA Event in 2011.

Mr. Sorensen is a veteran management professional with

34 years experience in product, partnership, and

marketing development. As president of the

IdeaWorksCompany consulting firm, he has enhanced the generation of airline revenue, started loyalty programs

and co-branded credit cards, developed products in the

service sector, and helped start airlines and other travel

companies. His career includes 13 years at Midwest

Airlines where he was responsible for marketing, sales,

customer service, product development, operations,

planning, financial analysis and budgeting. His favorite activities are hiking, exploring and

camping in US national parks with his family.

About Eric Lucas, Editor of the Report

Eric Lucas is an international travel, culture and natural history

writer and editor whose work appears in Michelin travel guides,

Alaska Airlines Beyond Magazine, Westways and numerous other

publications. Founding editor of Midwest Airlines Magazine, he is

the author of eight books, including the 2017 Michelin Alaska

guide. Eric has followed and written about the travel industry for

more than 25 years. He lives on San Juan Island, Washington,

where he grows organic garlic, apples, corn and beans; visit him

online at TrailNot4Sissies.com.

Eric, at his favorite summer retreat, Steens Mountain, Oregon.

Jay, with son Aleksei and daughter

Annika, in North Cascades National

Park in Washington.


Leading Ancillary Revenue Airlines

and the Women Who Boost Their Profits

Recognize the wisdom of women and celebrate their leadership

Women have been crucial contributors to human progress for millions of years. But society

has usually kept this light hidden under a basket, and this is especially true of the airline

industry. Only now is the industry beginning to see light escape through the wicker

weavings of this concealment. This report reviews the ancillary revenue products offered by

airlines that have earned a reputation for leading the way. This leadership relies on the

inclusion of women in executive positions responsible for ancillary revenue and a la carte

strategies. They are key members of ancillary revenue teams composed of bright,

innovative, and hard-working men and women. This is what happens when you strip away

the debris of the decades ― companies flourish when people are selected and promoted on

the basis of their ability, passion, and results.

This report focuses on women of today, but it’s helpful to

recognize that breaking into traditionally male work

spheres has never been easy. Consider the story of

Georgia Stebbins, who was one of America’s first female

lighthouse keepers.1 In a literal sense she shone her light for

all to see, as the Fresnel lens at the North Point Lighthouse

in Milwaukee, Wisconsin could be seen for a distance of 15

miles.

In 1873, 27-year-old Georgia was living with her husband in

New York City when she was diagnosed with tuberculosis

and given little time to live. She traveled to the fresh air of

the Great Lakes and stayed with her elderly father who was

North Point’s keeper. Amazingly, she recovered and was

soon joined by her husband. Within months, Georgia was

taking care of virtually all the keeper duties. These tasks included maintaining the lighthouse

and its grounds and climbing the tower every two hours during the night to refill the lamp

with oil and trim the wick. The US Lighthouse Service named her the official keeper in

1881. She continued her duties for the next 26 years, never once staying a night away from

the lighthouse grounds. Georgia died at the age of 74 in 1920 . . . just one month before

women received the right to vote.

1 NorthPointLighthouse.org website reviewed August 2018.

Georgia Stebbins


When Georgia was asked about her duties, she commented on how ordinary and

unremarkable they were. But she had successfully broken into a profession traditionally

held by men. Working unhindered she met the responsibilities of a very demanding

position, though her gender was likely unknown to the sailors kept safe by the beacon of the

North Point Lighthouse. The lesson provided by her life is very simple ― women are

workplace equals. Ruth Bader Ginsburg, a justice on the US Supreme Court, offers a blunt

assessment, “I ask no favor for my sex. All I ask of our brethren is that they take their feet off our

necks.”

These four airlines are ancillary revenue leaders in different ways

This report reviews the methods and the women behind the ancillary revenue success at

these four airlines: Alaska Airlines, Finnair, Jetstar, and WOW air. This is an intriguing

group of airlines and female executives. The best results occur when an airline masters the

task of aligning the troika of human resources, products, and customers. This requires

specific ancillary revenue methods that match the capabilities of the airline with the expectations of its customers. The latter are formed by the brand positioning of the airline.

Thus, the best ancillary revenue results flow from a thoughtfully conceived brand and a

positive reputation.

The table below displays key performance indicators for the four airlines, along with a broad

classification of carrier type. It would be unfair to directly compare the results. For

example, WOW air is not five times more effective than Finnair in its quest for ancillary

revenue. These two airlines are radically different in their customer approach. Finnair

seeks to maximize ancillary revenue while operating as a 2-class carrier with a history of oh-

so-attentive service. It’s a very difficult balance to achieve because the a la carte approach

can be seen as the polar opposite of the pampering that occurs in long-haul business class.

Ancillary Revenue Review of the 4 Airlines

Airline

Ancillary

Revenue as % of

Total Revenue

Ancillary

Revenue per

Passenger

Primary Ancillary

Revenue Source Type of Carrier

Alaska Airlines 16.9% $30.42 Frequent Flyer Network

Finnair 5.6% $13.88 Various Global Network

Jetstar * 23.2% $26.92 Various Low Cost

WOW air 28.5% $48.87 Various Low Cost

Source: 2017 Carrier Results, CarTrawler Yearbook of Ancillary Revenue by IdeaWorksCompany

Local currencies converted to US dollars at July 2017 rates of exchange.

* IdeaWorksCompany estimate based upon past disclosure.

Alaska shares some of the traits of Finnair, but operates within the distinctly different North

America market. The airline benefits from the gold rush style profits that co-branded credit

card portfolios generate in the US. This is largely thanks to credit-hungry consumers and

very generous merchant fees that fuel the bank revenue for card portfolios.


The most closely aligned airlines among the four are the two LCCs: Jetstar, and WOW air.

But even here, this duo reveals distinctions, with WOW air having a long haul route from

San Francisco to New Delhi. Jetstar reaches almost as far with Tokyo and Hawaii but also

has a major domestic network in Australia. The airline is owned by Qantas and participates

in its frequent flyer program. This report presents the four carriers in alphabetical order,

beginning with Alaska Airlines.

Alaska Airlines captures cash from its co-branded credit card

Cash flow from the Alaska Airlines Mileage Plan credit card was around $1 billion for 2017.2

Revenue produced by frequent flyer programs is a meaningful ancillary revenue component

for airlines in the US. Alaska doesn’t stop there, as the carrier also generates ancillary

revenue from a range of optional extras typical for a traditional airline. These include

checked baggage, extra leg room seating, onboard café and pre-order, inflight entertainment

and Wifi, and Premium Class seating. But clearly, the revenue associated with the Mileage

Plan frequent flyer program overwhelms the other categories.

Alaska disclosed that revenue from its Mileage Plan program represented 11 percent of total revenue for 2017, and that’s up significantly from 9 percent back in 2013. Credit

cardholders represent 30 percent of all Mileage Plan members, which is among the highest

penetration levels in the world. The airline recently described its Mileage Plan as crucial to

the carrier’s growth. Not surprisingly, the growth model is based upon flying “where

customers want to go with affordable fares.” But the model also invokes the frequent flyer

program as one of the core attractions that delivers repeat customers. Loyal members are

seen as a requirement to allow the airline to expand its network in terms of routes and

flight frequency. Alaska reinforces this model by making its co-branded credit card an ever-

present feature at all customer touch points to include an instant application offer on the

payment page in the booking path.

2 2018 Investor Presentation, dated 9 March 2018, Alaska Air Group

Instant credit gratification is assured by placing a credit card application in the booking path which delivers $100

savings, 30,000 bonus miles, and the ability to charge the ticket to the new card.


The growth model also references the delivery of superior value and excellent service as

the other core components of its growth model. Alaska enjoys a reputation among its

customers, and in its hub communities, for doing

the “right thing,” being kind hearted, and providing

a remarkable product.

This branding philosophy has naturally extended to

its a la carte services. Alaska’s “Signature Fruit and

Cheese Platter” sells for $8.50 and gets favorable

marks from passengers posting comments on social

media sites. Buy-on-board selections are designed

to feature food and beverages locally sourced from

the West Coast of the US.

The airline reliably places its unique personality on

the a la carte products it sells. Back in 2009, Alaska was the first airline to add a service delivery

guarantee for checked baggage. 3 Rather than

merely add a new fee, Alaska opted to design a new

service. The Baggage Service Guarantee (BSG)

promises delivery of checked bags within 20

minutes of arrival at the gate. When the standard

is not met, passengers may request vouchers for

2,500 Mileage Plan miles or $25 off a future flight.

The BSG has influenced the efficiency of station

operations because managers are eager to avoid the wrath of the home office when too

many resupplies of BSG vouchers are requested.

The airline uses a traditional dual lowest fare/refundable fare approach in its booking path

with a very limited selection of optional extras. Passengers may book a Premium Class

extra leg room seat and buy trip insurance in the booking path. Premium provides 4 inches

added leg room, early boarding, and includes cocktails, wine, beer, soft drinks, and coffee.

The airline appears to only apply a la carte fees when it can deliver enhanced service, as it

does with food, baggage, and Premium Class seating. For example, standard seats are

assigned without charge, and soda and coffee are served free from the trolley. This mix of

traditional value, with fees applied for enhanced service, has positioned Alaska as a top-

ranked airline in terms of profits and customer satisfaction.

Toni Freeberg ― Leader Profile

Position Director, Distribution and Ancillary Strategy for Alaska

Airlines.

Alaska

Experience

31 years at the airline with prior responsibilities include

loyalty, international and domestic sales, e-commerce,

leisure marketing, and revenue management.

Prior

Companies

Freeberg’s first official job was at Alaska, where she was the

manager of the Mileage Plan program.

3 “Alaska Air Group Reports First Quarter Results” press release dated 23 April 2009.

Imagine an airline advertising the speedy

efficiency of its baggage service.


Toni Freeberg – The 3 Question Ancillary Revenue Interview

1. How do you best introduce new customers to the a la carte approach?

“As a traditional full service airline, introducing a la carte products is almost more important for

our existing customers who are not used to seeing us unbundle our products. We use a multi-

channel approach which includes the online booking path, content pages on the website, as well as

post-booking emails. Assigned seating is the primary a la carte product we promote prior to

departure. Most other optional extras are offered during the check-in window. While customers

are shopping for a flight, they get introduced to our Premium Class product on the seat map page.

It’s there that we describe the product benefits. This is supplemented by additional information

about seat options in other areas of the website.”

2. How do you ensure customer contact staff become better sales people?

“We have invested in more creative and interactive training which includes videos featuring our

employees, and contests to engage our customer contact staff. We used this combination when

Premium Class was introduced, and it was very successful. Our employees are bombarded with

continuous change in all areas of the company, so we had to develop ways to ensure they took the training. It is important that our employees understand the features and benefits of each product

so they can explain them to our customers.”

3. What have you learned about selling via newer channels such as GDS and mobile?

“Selling through these channels is different and challenging. We are in the early stages of

developing our mobile experience and have been successful with our assigned seating and

baggage offers. As for the GDS, it’s not a channel in which we currently distribute ancillary

products.”

Finnair uses GDS to build a global network of ancillary revenue

Finns seem to naturally take life’s challenges in stride. Perhaps it’s because a good portion

of the country lies above the Arctic Circle. Or maybe it’s the challenge once faced by

sharing its entire eastern border with the former Soviet Union. This country . . . and its

national airline . . . have learned to squeeze success from being resilient.

Finnair faces plenty of challenges, with markets now influenced by low cost Norwegian

Airlines and a hub location at the corner of ― not in the center of ― Europe. With the high

cost structure of a tenured workforce, the airline knew it could not adopt the LCC model.

Instead, it has always aimed higher with a premium product offering special appeal to

business travelers. Lately, the strategy has been reinforced with an array of a la carte extras

that meet the agency distribution desires of corporate clients. Finnair is a global leader for

its efforts to generate ancillary revenue through global distribution systems.

Finnair ― A la Carte Services Sold Through GDS

Amadeus Animal transport, baggage, bundled fares, meals, medical

assistance, paid seats, sports equipment

Sabre Baggage, branded fares, paid seats

Travelport Baggage, bundled fares, lounge access, meals, paid seats,

unaccompanied minor, Wifi access

Source: GDS websites reviewed August 2018


The airline has become a master of a la carte sales in the online booking path. Under the

branding of “Travel Extras” consumers are invited to select a seat, add baggage, pre-book

meals and treats and lounge access; and purchase Wifi, cancellation protection, and trip

insurance. The carrier uses attractive graphics and promotional language such as “book

online and save at least 20%” for its checked bags offer.

The airline has introduced a very

attractive “seat and meal package”

to select markets within Europe.

The offer is presented as the first

Travel Extra and is fulfilled through

the seat map. Seating features the

front rows of the economy cabin.

Once a “seat and meal” location is

selected, the booking path

responds with three entrée

options. Clicking further for information provides a description

of each meal.

The package includes wine, beer

or soft drink on board from the

Sky Bistro selection (excluding

Champagne). It’s an inviting one-

click-selection to entice travelers to buy an upgraded experience on an intra-Europe flight.

Finnair’s complimentary service is limited to coffee, tea, water, and their signature drink of

blueberry juice, on most European flights. The package is ideal for business travelers who

won’t pay a business class fare, but are willing to pay a premium for service beyond regular

economy.

The airline also innovates with the Finnair Cancellation Cover which is an optional extra

offered at the end of the booking process. This is not trip insurance provided through a

third party, rather it’s a service offered by the airline. For a modest price ranging from

€6.90 per adult for domestic flights within Finland to €29.90 for intercontinental flights, the

airline will refund the fare paid, in the case of medical emergencies.

Finnair's "seat and meal package" displays this inviting call to action in the booking path for select European

itineraries.

Within the seat map function, this pop up box appears when a

"seat and meal" location is selected.


The sudden sickness, accident or death of the passenger, another passenger in the same

booking, or a close family member qualify as covered events. Wisely, the airline will also

refund optional extras purchased by the consumer.

Finnair has a robust ancillary revenue portfolio inspired by the high quality style of the

airline. The online presentation of Travel Extras is attractive and effective in a retail sense,

and deserves kudos for its GDS efforts. The desire disclosed in the 2017 annual report to

“almost double ancillary sales by 2020 as compared to 2016” appears to be an achievable

objective.

Marika Pauli ― Leader Profile

Position Head of Ancillary Product Development, Customer

Experience for Finnair.

Finnair

Experience

More than 10 years at Finnair, with a strong background in

revenue management & pricing before joining the ancillary

revenue team.

Prior

Companies

Swiss International Airlines, Carlson Wagonlit Travel, and

Student & Youth ― STA Travel.

Marika Pauli – The 3 Question Ancillary Revenue Interview


“Our methods are based upon three criteria. First is visibility, so the customer knows what is

available for sale. This is supported by rich content in primary distribution channels and

touchpoints, which of course includes agency sales. Second is relevance and personalization, which

makes offers based upon customer needs. Third is “time and place,” which replaces the usual

method of bombarding customers with millions of pre-departure emails. This places the offer

where it makes the most sense, such as the booking flow, during check-in, and even during the

journey if the service will improve the overall travel experience.”


“First and foremost, we make certain to select the right people with the correct competencies.

Then we support this with constant training and coaching with all staff going through ancillary e-

learning and talent development programs. And finally, there are incentives, and these are both

team- and individual-based to stimulate higher performance. These are determined by shared key

performance indicators and we also recognize the best ancillary sales person each month.”


"It’s important to understand where (which market) and to whom (customer segment) we would

like to sell a product. For example, in China 90% of tickets are still sold via travel agents, but the

younger generation is buying everything via mobile, so there will be a clear channel shift in the

future. We need to be constantly aware of what is working, where it’s working, and to quickly

react. Direct channels will provide the majority of ancillary revenue growth, whereas indirect sales

(GDS and NDC) will bring significant growth for basic ancillaries (seats, bags, meals and upgrades)

especially from Asia."


Jetstar uses bundles and subscriptions to deliver ancillary revenue

If someone goes above and beyond, that’s likely the beginning of a long term relationship.

This is the method Jetstar uses to attract passengers and build ancillary revenue. The airline

notably places its subscription benefit program at the beginning of the booking path. Club

Jetstar has the customer invest in the relationship by charging an upfront membership fee.

Next in the booking path are Jetstar’s bundles which make choosing more comfort and

convenience a one-click exercise. The booking path concludes by delivering a one-stop-

shop for car hire, hotels, airport transfers, and airport parking tailored to the itinerary.

Club Jetstar represents a classic subscription program by delivering a basket of benefits for a

one-year period for a fee paid in advance. The program has more than 200,000 members

across the Jetstar group of airlines.4 That’s approximately A$10 million ($7.4 million) annual

ancillary revenue just from the membership fee. Those members also purchase lots of

flights.

Jetstar disclosed that club members saved over A$1 million in baggage and A$500,000 on assigned seats during a 6+ month period (01 July 2017-25 February 2018). The loyalty

created by Club Jetstar exceeds the power of a frequent flyer program. Members strive to

reduce their per trip membership cost by . . . taking more and more trips.

Jetstar is best known for its bundling approach to fares (see the image on the next page).

Every customer begins with a “Starter” fare and then is presented the choice of three

bundles. The FlexiBiz bundle was added during 2017 and features a unique combination of

an oversized carry-on at 10 kg (22 pounds) but no checked bag. This acknowledges

business travelers who don’t want to check a bag and prefer a medium-size roll-on bag.

It’s common practice for airlines to always include a checked bag with higher priced fares;

Jetstar presents a refreshing change from that. Surprisingly, the FlexiBiz fare doesn’t include

frequent flyer accrual. Most surprisingly, Jetstar determined that low fare business travelers

didn’t aspire to participate in a frequent flyer program.

4 Jetstar Australia post on its Facebook page dated 28 February 2018.

Club Jetstar benefits apply for the member and up to four other persons in an itinerary.


Jetstar has added intelligence to the booking path. After the consumer selects a fare bundle,

the booking path moves on to bags and then to seat assignment. Jetstar is unique for its

“Quick Select” option which automatically assigns a seat according to the consumer’s choice

of standard or upfront. The system picks a seat (while trying to keep parties together) or

the consumer can choose the seat from a map. Extra leg room seats require an extra step

to ensure the passenger can comply with exit row restrictions.

Navigation through the booking process is more convenient than with most airlines. The

menu bar at the top allows a consumer to click to easily return to prior pages and make edits. Too many airline sites require the consumer to begin the process anew when making

changes to a booking in progress. The website is mobile optimized, and yes the Quick

Select feature works on a phone as well as a laptop. That’s evidence of great retail skills ―

ensuring consumers enjoy a pleasant and productive shopping experience no matter which

direct platform they choose.

Jetstar customers can scroll through the bundle presentation to view eight rows of features; the top four are

displayed here. The other four are FFP rewards, flexible fare, no change fee, and flight cancellation.

In a hurry to get assigned? Jetstar customers can use Quick Select and avoid the seat map.


Catriona Larritt ― Leader Profile

Position Chief Customer Officer for Jetstar Group.

Jetstar

Experience Three years at Jetstar.

Prior

Companies The Boston Consulting Group, Spotless, Australia Post.

Catriona Larritt – The 3 Question Ancillary Revenue Interview


“Our low-cost model is built on choice, which allows customers to travel for less. By being simple,

fair and transparent about our low-cost choice model, our customers can book with confidence

and realise that travel doesn’t have to be expensive. We deliver this through all our digital

channels and marketing communications, using personalisation and merchandising to ensure a

customised experience based on customer needs and behaviours. Our booking path provides

customers with information on the choice model and highlights the price advantages of adding a

product at that time (e.g. bags are more expensive at the airport). We use fully automated post-

booking emails to personalise communications and suggest ancillary products based on flight logic,

booking type, and prior history to promote a la carte products after the initial purchase.”


“We actively involve frontline team members in product development through the ‘Customer

Council,’ seeking feedback on product design and challenging them to come up with solutions to

business challenges. Frontline staff become better at sales because they are engaged in the design

process and they have products they believe in. Our customer-facing teams are also encouraged

to think of our offering as an end-to-end travel experience. This is embedded in the way we

recruit, develop, measure, reward, and engage airport, cabin, and contact centre staff. The team

are educated on the product offering and incentivised to upsell and cross-sell ancillary products in

addition to flights. We equip them with knowledge, skills and tools to promote sales, including

guidance on customer-specific ‘next best offers.’ ”


“Selling a la carte products on mobile is more challenging than desktop because there’s less space

to communicate and customers want to move through the booking flow more quickly. However,

mobile is critical for us because it’s more than 50 percent of bookings in some key Asian markets.

We’ve recently adopted a ‘mobile first’ approach to digital design and optimisation (a technical

and mindset shift) and are focused on the user experience (which needs to be tailored to each

market) as well as site speed. We complement mobile sales with other communications (e.g.

email, push notifications) to encourage post-purchase additions. Ultimately, personalisation helps

mobile: providing customers with a personalised product and service offer upfront will enable a

three-click checkout with full ancillary upsell.”


WOW air stretches a la carte to greater distances

WOW air is a long-haul low-cost airline based in Iceland. The airline serves 14 gateways in

the US which include smaller cities like St. Louis and Cleveland. These connect with

destinations in Europe, Israel, and soon New Delhi. For example, Newark flyers can choose

20 destinations in Europe along with Iceland.

The airline uses branded fares

to speed consumers through

the booking path. There are

three regular economy choices

(Basic, Plus, and Comfy) along

with WOW Premium which

delivers lots of amenities and a

big seat. Based upon the

results disclosed by other branded fare carriers, it’s likely

that more than half of

passengers upgrade themselves

to the higher priced Plus,

Comfy, and Premium fares.

The pie chart displayed on this page discloses the crucial role played by checked baggage for

the airline; it generates more than 65% of ancillary revenue. WOW air is very serious

about its baggage policy. It’s

one of the few airlines to

charge a fee for large carry-

ons. Others in this category

include Allegiant, Frontier,

and Spirit. The list once

included Wizz, but the airline

has backed off fees for

medium size carry-ons.

Passengers may bring a

personal item free of charge,

often defined as a purse or

laptop. Fees are charged for

the typical medium size roll-

on bag loved by many

travelers. The policy has an

attractive outcome with

boarding and deplaning time

greatly reduced without the

delay of stowing bags. But

make no mistake, the policy is

designed to drive ancillary

revenue, and in return

consumers get to enjoy really

low base fares.

Baggage65.5%

Onboard Sales8.3%

Other Activities25.2%

Commission-Based Retail0.6%

Advertising Sold by

Airline

0.4%

WOW air 2017 Ancillary Revenue Sources

Based upon company disclosures

Source: 2018 CarTrawler Yearbook of Ancillary Revenue by

IdeaWorksCompany

Wow air consumers are required to click a box to confirm their acceptance

of the carry-on bag restriction.


WOW air is based in one of

the world’s most compelling

tourism destinations. Iceland

can also be a very expensive

place to visit, which prompts

travelers to eagerly seek

discounts. Here the airline is

happy to oblige its customers

with sightseeing, hotel, car

hire, and airport transfer

offers sprinkled throughout

the booking and travel

process. Cabin crew also

have a book of vouchers on

the flight for the sale of

Iceland sightseeing excursions. The booking

path includes the ability to

book a transfer direct to

your Reykjavik hotel. The drop down list

includes 160+ hotels and stops served by Flybus.

The seat map features the big 2x2 Premium seats

at the front of the cabin. It also offers the

unusual choice of two types of extra leg room

seats: XL and XXL. On a flight between

Chicago and Reykjavik, XL pricing was $39 (32-

33 inch pitch) with XXL at $49 (35+ inch pitch).

XXL seats are placed at the exit rows, while XL

is a zone behind the Premium seating. WOW

air’s standard seat pitch is 29 to 30 inches.

That’s unusually snug for a long-haul flight, with

most airlines starting out at 31 or 32 inches.5 So

the extra room is probably a wise purchase for

passengers desiring a modicum of comfort.

WOW air is a product of the LCC model and

that’s why it concentrates on the big revenue

item of bag fees. Space on a long-haul flight is a

precious commodity, and the airline has done a

masterful job of creating different seat products

to tap various levels of consumer spending. The

carrier’s tourism base motivates it to capture a

greater share of traveler spending, which it does

through its travel retail activities. It’s a long-haul

LCC that seems very much in control of its

future.

5 Long-haul Economy Class Comparison Chart at SeatGuru.com reviewed August 2018.

The rates charged are comparable to those found at the Flybus website.

Rather than have a few extra leg room seats, long-

haul WOW air offers an entire zone on this 36-

row A321 aircraft configuration.


Ragnhildur Geirsdóttir ― Leader Profile

Position Chief Operating Officer for WOW air.

WOW air

Experience One year at WOW air.

Prior

Companies Landsbankinn, Promens, Icelandair.

Ragnhildur Geirsdóttir – The 3 Question Ancillary Revenue Interview


“In general it should be said that customers are getting used to the a la carte approach, meaning

that they expect it. Legacy carriers are now also adopting the model. What we try to do is to

keep the concept as simple as possible and display it clearly in the booking process. Our main

challenges currently are on non-web channels and with some OTAs. In all cases we want our

customers to be aware of our a la carte approach and don’t want to surprise them last minute.”


“The key here is simple rules that are easily implemented. The more complicated the rules the

more difficult for our staff to implement. Frequent communication and training is also very

important as well as a mix of incentives and motivation.”


“GDS and mobile are at different ends of the extremes. GDS is an old technical platform which

makes it challenging to communicate and sell ancillaries. Mobile ― and especially apps ― have

much more modern capabilities and this provides opportunities to personalize and promote

ancillaries.”

Four ancillary revenue strategies from four airline leaders

Ancillary revenue has become a universal need for all airlines because it provides a hedge

against the unpredictability of airline fares and the risk of rising fuel costs. The four ancillary

revenue leaders presented in this report, along with the four airlines, each have their own

stories of success. This report discloses strategies contributed by each, which can be

embraced by any airline wishing to give its ancillary revenue a boost:

Alaska: Don’t just add fees to existing products, but rather enhance the service to

create a new product. Then customers will more readily accept the change.

Finnair: Strive to design a la carte services that are supported through all channels:

web, mobile, and GDS.

Jetstar: The loyalty created by subscription programs exceeds the power of frequent flyer programs, while delivering reliable revenues from membership fees.

WOW air: Keep the rules simple so they are more easily implemented by customer

service staff and understood by customers.


Documents

Leading Ancillary Revenue Airlines IdeaWorksCompany.com ...€¦ · task of aligning the troika of human resources, products, and customers. This requires specific ancillary revenue